McCormack Graduate School of Policy and Global Studies | January 16, 2013

The Gerontology Institute at the McCormack Graduate School of Policy and Global Studies, in collaboration with Wider Opportunities for Women, has developed a new tool to measure the income that older adults require to maintain their independence in the community and meet their daily costs of living. In their report, "National Elder Economic Security Standard Index", they have found that, in every state and every county, elders who live at the federal poverty level, or who are totally dependent on the average Social Security benefit of 2011, need housing and health care supports to cover their expenses.

Developed by a team of faculty and research staff at UMass Boston’s Gerontology Institute led by Professor Jan Mutchler, the "National Elder Economic Security Standard Index" (Elder Index) measures what it costs to live modestly in the community. It is geographically-specific, enabling policymakers, older adults, family caregivers, service providers, aging advocates, and the public at large to compare costs to income to determine where gaps exist. The development and use of the tool promotes a measure of income adequacy that respects the autonomy goals of older adults, rather than a measure of what we all struggle to avoid – poverty.

New Tool Measures Income Adequacy

The Elder Index benchmarks basic cost-of-living for elder households and illustrates how cost-of-living varies geographically and are based on the characteristics of elder households, including household size, ownership or renter status, and health status. The costs are based on market costs for basic needs of elder households and do not assume any public supports beyond Medicare.

According to Ellen Bruce, director of the Gerontology Institute and a lead author on this report, “Economic well-being is based not only on income but also required expenses. The Elder Index allows us to measure the gap between income and expenses. Individuals, policymakers, and service providers can use this tool to evaluate the need for personal savings and government supports such as food assistance, energy assistance, subsidized housing, or property tax help.”

Findings

The gerontology researchers had four major findings:

1. Throughout the United States, neither income at the federal poverty level nor the average Social Security benefits provides enough income to cover basic living expenses. Researchers found that basic living expenses are considerably higher than the poverty guideline or funds elders received from Social Security benefits. For example, while poverty level for a single individual was $10,890 in 2011 and the average Social Security benefit was $14,105, the Elder Index found that a single renter needed $22,848 to live without government supports.

2. Housing costs (mortgage or rent, taxes, utilities, insurance) are the greatest expense for most elder households, representing as much as half of the total expenses. Researchers found a wide variation in costs across the country. Depending on whether elders rent or own and where they live, renters could be paying upwards of $1329 per month and mortgage holders dished out up to $1871 monthly.

3. The Elder Index shows the significance of healthcare costs for elders who purchase supplemental health and prescription drug coverage through Medicare. Based on nationwide averages, older adults in good health face combined health care costs of $381 per month to protect against high medical and prescription drug costs. Since retired couples are unable to purchase supplemental insurance through a “family plan,” their costs are doubled, totaling $762 per month.

4. Elders’ changing circumstances may create a situation where the elder was once meeting the expenses but can no longer do so. The death of a spouse or the decline in one’s health can seriously affect their income levels.

Demographics and Policy Impacts

According to the 2011 census population estimates, 13.3% of US residents were 65 years or older, and 12.2% were between the ages of 55 and 64. By the year 2030, 78 million will be over 65 – almost double the number in 2005. As more and more Baby Boomers reach retirement, the strains on our social and health care systems will be strongly felt.

According to Ira A. Jackson, dean at the McCormack Graduate School, “People are living longer than ever before and the demand for policy changes to address the challenges of an aging population is increasing at a rapid rate. We hope that this report illuminates some important answers about adequate income for older adults and gets individuals and policymakers thinking about how to help provide economic security to this growing population.”

The Gerontology Institute at the University of Massachusetts Boston’s John W. McCormack Graduate School of Policy and Global Studies addresses social and economic issues associated with the aging population. Working with local, state, national, and international organizations, the institute conducts research, analyzes policy issues, and engages in public education on issues of productive aging, health care, long-term care, economic security, and social and demographic research on aging. The institute pays particular attention to the special needs of low-income and minority elders. The Gerontology Institute also houses the new Center for Social and Demographic Research on Aging, the New England Pension Assistance Project, the National Pension Lawyers' Network, and a very successful Osher Lifelong Learning Institute, and works closely with the Gerontology Department, which is the second oldest program of its kind in the nation and has produced more PhDs in gerontology than any program in the world.